Eurozone

The one undeniable truth about the debt drama in Greece is that each of the conventional narratives - financial, political and historical - has some claim of legitimacy. These facts matter not only because contagion from Greek debt defaults may ripple in dangerous ways through the financial system, but because they are also true for many other members of the Eurozone. The Euro is a fatally-flawed monetary concept and what we now seeing playing out was eminently predictable from the start.

The first targets of Tsipras purge of "party rebels opposed to an austerity package that will have to go through parliament within days" include the most prominent rebels, Energy Minister Panagiotis Lafazanis, leader of the so-called "Left Platform" within Syriza and Deputy Labour Minister Dimitris Stratoulis, a former unionist and a fierce opponent of pension cuts. The next scalp Tsipras would love to have is that of the "uncompromising speaker of parliament, Zoe Constantopoulou, who also defied Tsipras and abstained from the vote" although she would require a no confidence vote to be replaced "but the other rebels would be expected to resign their seats, the same people say."

This weekend's events in Europe have clarified who is really running the show across the 'union'. Hans-Werner Sinn, Chairman of the Ifo Institute for Economic Research, vehemnt euroskeptic, and head of the so-called 'five wise men' advising the German government and specifically Angela Merkel, confirmed his call from 2012 for a "temporary grexit from the euro." The right wing economist previously explained "Greece and Portugal have to become 30-40% less expensive to be competitive again. This is being attempted through excessive austerity measures within the euro zone, but it won't work. It will drive these countries to the brink of civil war before it succeeds. Temporary exits would very quickly stabilize these countries, create new jobs and free the population from the yoke of the euro." Anyone positioning for more centrist union-supporting rhetoric, hope is no longer a strategy as the hardest conservatives are now in charge.

After ramping gloriously on Thursday and Friday, basking in the warm after-glow of an assured done-deal, the FX market appears to be deja-vu-ing all over again as EU leaders throw up all over Greek proposals. EURUSD is indicated 1.1085/1.1056 in pre-market - down around 100 pips from the Friday close - following what one official called "extensive mental waterboarding" of Greek PM Alexis Tsipras.

Former Goldmanite George Jabbour thinks Greece should take legal action against Goldman for the bank's role in helping the country hide its debt. We can only hope that if Greece does indeed decide to take Mr. Jabbour up on his offer to help clawback some of the half billion euros the bank reportedly pocketed from the deal, that the discovery process will help shed some light on whether the man now in charge of the ECB personally oversaw and endorsed the perpetuation of the Greek lie.  

It was a weekend in which, according to traders, Greece facing an "absolutely final" was going to be saved. Instead, it may go down in history as the weekend in which the Eurozone finally split and its long-overdue disintegration began.

While there is "hope" in the unforgettable words of France's Moscovici, it is once again up to Greece to convince Europe it really wants to stay in the Union. According to Reuters, the Eurogroup is about to release a statement, whose draft it has seen, which will demand much more from the tiny country caught in a state of permanent depression. To wit: Greece will not be able to start negotiations on a third bailout until it makes changes to its sales tax and pension systems and strengthens the independence of its statistics office, a draft statement of euro zone finance ministers said on Sunday.

€10-14 billion was bad enough, but €25 billion may have been simply too much to bear...

Here is the punchline from Greek nemesis #1, Schauble: SCHAEUBLE PROPOSES TIME-LIMITED `GREXIT': FAZ; SCHAEUBLE SUGGESTS 5-YR GREXIT, HUMANITARIAN SUPPORT: FAZ

In other words, Germany just said kick Greece out, conditionally, for 5 years (it is not quite clear what Greece would use for currency in the meantime), quarantine it, and treat it as a third-world country until 2020. Somehow we doubt global stocks expected this outcome when they soared on Friday...

Initially it was just an unconfirmed rumor circulating in the German FAS media that the local FinMin had proposed a "temporary Grexit" option. It now appears that this was not only not a rumor, but Schauble's sentiment is contagious: moments ago Finnish broadcaster MTV reported that first Finland, and then the Eurozone's smaller, if somewhat more solvent nations, Estonia, Lithuania, Slovakia, Slovenia and even the Netherlands, support the German position on temporarily suspending Greece' Euro membership.

Tsipras betrayed the public trust last night when we rammed through a draft proposal for a Third Greek bailout, one which would push total Greek Debt/GDP over 200%, which the Greek population overwhelming rejected in a democratic vote last weekend. And now, it is up to Europe to decide if it will trust the Greek government, which clearly has no problem lying to anyone, to implement reforms which Greece has been unable to effect for over 5 years.

Non-bombastic look at the price action and speculative positioning, with the hope of anticipating next week's developments.

"Schäuble is convinced that as things stand, he needs a Grexit to clear the air, one way or another. Suddenly, a permanently unsustainable Greek public debt, without which the risk of Grexit would fade, has acquired a new usefulness for Schauble. What do I mean by that? Based on months of negotiation, my conviction is that the German finance minister wants Greece to be pushed out of the single currency to put the fear of God into the French and have them accept his model of a disciplinarian eurozone."

Every nation has a right to defend itself against attack – financial attack just as overt military attack. That is an essential element in the principle of self-determination. Greece, Spain, Portugal, Italy and other debtor countries have been under the same mode of attack that was waged by the IMF and its austerity doctrine that bankrupted Latin America from the 1970s onward. International law needs to be updated to recognize that finance has become the modern-day mode of warfare. Its objectives are the same: acquisition of land, raw materials and monopolies. A byproduct of this warfare has been to make today’s financial network so dysfunctional that nations need a financial Clean Slate.